Google the question and you will see a range of percentages, 70-85% is common, but the general standard is 80%. I know people who say they are doing fine on 45% or 60% and living “comfortably.”
The AARP explains it this way.
The rule of thumb is that to you’ll need about 80 percent of your pre-retirement income to maintain your lifestyle in retirement, although that rule requires a pretty flexible thumb.
Why not 100 percent? For one thing, you will no longer be paying payroll taxes toward Social Security (although you may have to pay some taxes on your Social Security benefits), and you won’t be shoveling money into your 401(k) or other savings plan. In addition, you’ll save on the usual costs of going to work, such as new clothes, commuting, lunches and the like.
One thing wrong is the assumption people are “shoveling money” into their 401k. The current average saving for those actually using a 401k is 7%. More like a potting trowel than shovel. 22% of workers say they are not saving at all.
The other thing is all the other “saving” items listed above can easily be offset by new spending, including discretionary.
In any given year you may be able to live on 70-80% of your former base salary, but we are talking about decades for stuff to happen that requires more spending.
And then we have:
A common rule is to budget for at least 70% of your pre-retirement income during retirement. This assumes some of your expenses will disappear in retirement and 70% will be enough to cover essentials. Remember, that’s a general guideline, and your needs may vary.
Nerd wallet.com
Cover essentials? Is that how you envision retirement- covering essential?
Or maybe:
Start with a general rule of thumb. After analyzing many scenarios, we found that 75% is a good starting point to consider for your income replacement rate.
You’ll likely need less income in retirement than during your working years because:
- Most people spend less in retirement.
- Some of your income during your working years went toward saving for retirement, which isn’t necessary anymore.
- Your taxes will likely be lower—especially payroll taxes, but probably income taxes as well.
The 75% income replacement rate ballpark figure is based on reducing your spending at retirement by 5% and saving 8% of your gross household income during your working years. We chose 8% because it’s about the average that people are saving in their retirement accounts.
Troweprice
Saving 8% while working is unlikely to even allow 75% replacement. Many people will easily wipe out that 5% by going from employer health benefits to buying in their own or Medicare.
If you start collecting Social Security at full retirement age of 67, the benefit will replace about 33% of a working earnings of $70,000.
Or even:
While the 70-80% Rule is a good starting point, the actual percentage can vary considerably depending on individual circumstances. A study of actual retirement cost found that while spending in retirement ranges from 54-87%, that most retirees use 70% or less of their former income.
53.com
Finally:
We have this view.
It’s important to consider what sources of reliable income you will have in retirement. Reliable income is defined as guaranteed, and sustainable, and I would add increasing income potential from sources such as Social Security, pensions and certain income annuities or annuities with guaranteed income (may be provided through an additional cost rider). It is important for a successful retirement to establish and build up these sources so that you will not outlive your money.
First, you need to assess how much of your essential expenses will be covered by those reliable sources. To do that, you take your reliable income divided by your income need. This number is your reliable -income percentage. Generally, the greater this percentage, the less your income will be affected by various market risks. But you likely don’t want that number to be 100%. These reliable sources of income often lack liquidity and opportunities for growth.
Kiplinger
What the above is saying is you need reliable, guaranteed income streams, but also more flexibility than a fixed income covering your essential spending needs. You need a way to deal with inflation and expenses beyond the essentials.
Don’t base your income replacement percentage on essential living expenses alone.
So, how do you want to live in retirement –
getting by, covering essentials, paying the bills?
I think you should strive for more than 80% base income replacement, what do you think?
QUINNSCOMMENTARY 
We may not be typical, but since my wife and I lived a modest lifestyle during our accumulation phase, we mostly continued that in retirement. I found that our routine living costs were about 75% of our pre-retirement expenses. But, with our time freed up to do other things our other expenses were far higher than before. Those “other expenses” included things like more travel and greater donations to causes we supported. For the past several years we have taken two ‘big trips’ per year plus going to visit family. Our expenses for those years actually exceeds our pre-retirement costs. Living modestly and saving regularly during our working years allows us to do this quite comfortably.
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In my opinion, a better approach is to consider expenditures instead of trying to replace an arbitrary percentage of pre-retirement income. Once you know your true ‘burn rate’, you can calculate how much money you actually need in retirement and work out where this money will come from (pension, savings, social programs, etc.). In my case, I had been tracking my expenses for 15+ years before retiring and knew exactly how much I was spending each year. I made some adjustments (less $ on commuting, eating out and clothing, more $ on travel and hobbies) and used this figure as a target income. I have been retired for nearly 8 years now and my actual spending is very close to what I had calculated.
Using X% of your working years’ income as a target income for retirement assumes that you actually spent the full X% of your income, which may be true for some but is not universally true. Using an adjusted burn rate is more representative but it requires a realistic (and not overly-optimistic) analysis of actual expenditures.
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But if you rely of projecting expenses many years in the future seems you are at risk as that is pretty impossible. Using a percentage of working income – I favor 100% – means you don’t have to track expenses and you likely have a cushion to deal with inflation. It should also cover some savings and discretionary spending. My view is no matter how it’s done, income determines the limits on spending.
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Interesting perspective, Dick, but I respectfully disagree. Basing your target retirement income on 100% of your working income implicitly implies that income *drives* spending instead of merely *limiting* spending. Also, what income should be used in this calculation: earnings from the best year or from the last year of employment? The numbers can be drastically different: during the financial crisis of 2008, I lost my job. When I started a new job a few months into 2009, my salary was ~30% lower. Did my expenditures drop by that same percentage? No, my spending remained more or less the same throughout (though my savings rate declined). So which salary should I seek to replace in retirement – the higher one or the lower? Basing my calculations on my expenditures just made more sense to me.
I do agree with you that is not easy to project spending far into the future, and that a cushion is required to deal with the unexpected. What is debatable is how deep this cushion need be.
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I should have clarified that I was talking 100% of base pay at time of retirement, excluding bonuses, OT, etc. Income also drives spending in the form of lifestyle creep although in retirement it is a limiting factor more than anything.
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You were able to sustain spending with a 30% reduction? I suspect then you were at a pretty high savings rate as the offset.
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There are as many answers as there are incomes I suppose. If your income is 60k at retirement, I’d say at least 100% replacement. If it is 500k or more, I’d say why can’t you live on 80%. Amounts in between are more variable. I’ve been retired long enough to not relate to my income before retirement. We have monthly living expenses that are covered by monthly income but large expenditures and discretionary spending is covered out of the nest egg built up over the years. It’s simply not related to some income I made 20 years ago.
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What comprises regular monthly income, pension, Social Security, annuity?
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Regular monthly income is comprised of social security, a trio of pensions (none large enough to carry the ball on their own) and some dividends (also not large enough to make any significant difference) and lately interest has been trending up but we leave most of that alone since it wasn’t a factor for so many years. No purchased annuity.
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